Saudi FDI opening ‘may slow down IPOs’

Jeddah, July 29, 2014

Saudi Arabia's decision to open its stock market (Tadawul) to foreign direct investment (FDI)could curb initial public offerings (IPOs) in the kingdom as it could make local firms cautious about giving up stakes in their business to foreign control, a report said.

"There are a lot of family conglomerates with, say, 20 percent on the Tadawul (Saudi stock exchange)," Khalid Murgian, managing director of Neuberger Berman in Dubai was quoted as saying in the Saudi Gazette.

"It will be anathema to them that some foreign manager(s) can come and tell them how to manage their business. It may have a perverse effect of having fewer companies come to market."

“It is not only the mindset of Saudi companies that may resist foreign influence,” Murgian explained.

“Few stocks in the country are majority free floating, and in addition, the Saudi regulator, the Capital Market Authority (CMA), is likely to impose caps on foreign ownership.”

"The key for the CMA will be to help these mid-sized businesses understand why having foreign shareholders is an opportunity and not a threat," Murgian was quoted in the report.

"In Saudi Arabia there is a strong pipeline... but companies are taking time getting through the CMA review process," said Steve Drake, head of PwC's capital markets in the Middle East, in the report.